Technical Sentiment: Bullish
- Investors await JPY Current Account and the Final GDP on Sunday;
- Long term bullish channel remains intact;
- NZD/JPY bulls are trying to escape the short term pressure but pivot zone held on Friday.
The Kiwi finished the week on a strong note against it Yen counterpart. The rally to last week’s high of 87.42 came after NZD/JPY finally tested the support of its yearlong bullish channel. If JPY data disappoints on Sunday night, NZD/JPY could continue this recent ascend within the bullish channel, towards 89-89.90 and even higher.
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NZD/JPY is currently trading around 87.20; with price being squeezed from above by a short-term bearish trend and from below by its major 1-year bullish channel.
A break above 87.42 will trigger stop losses held by short traders, invalidating the bearish swing configuration of Lower Highs at the same time. This resistance is strengthened by the 200 Simple Moving Average on the 4H time frame, together with the 38.2% Fibonacci Retracement on the entire bearish move from March to May (89.89 down to 85.82). A bullish break-out will open the higher towards the 50-Day Moving Average (currently priced at 87.79), followed by the 61.8% Fibonacci retracement level of 88.34 and later the major resistance at 89.19.
Daily stochastic is exiting oversold territory, suggesting the recent bearish cycle is complete and NZD/JPY is likely to continue higher in the next few weeks. A rally and close above 87.42 will provide such a confirmation.
Failure to continue above the 87.42 resistance will lead to a support re-test for the bullish channel, around 86.40. Only a Daily close below this support trendline will confirm that this bearish correction is not finished yet; in which case NZD/JPY losses could then extend until price reaches the 200-Day Moving Average, located at 84.81.
Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets